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Crypto to Crypto complications

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Initiate

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I have read in multiple forums that crypto to crypto trades are deemed as a disposal of assets and as such incurrs tax given it wasn't for personal use. I am neither an accountant or a solicitor but I have a strong feeling this is not right. Please feel free to discuss.

1. Contradiction in accepting that crypto to crypto trades incur gains in value which are recognisable for tax purposes but cannot be used themselves as a payment of said tax
2. If gains in crypto value are realised and the ATO only accepts payment in AUD that forces the investor/trader to liquidate said asset to pay tax on such gains which doesn't sound right
3. Liquidating crypto assets to pay tax on prior crypto to crypto gains is in itself a second disposal event and would lead to further taxation as well as pushing the investor/trader's tax bracket when the said person has only receives said gains only once but it was taxed twice and hit his tax bracket twice.
4. When trading crypto to crypto normally sales orders are broken down to tens and sometimes hundreds until the order is closed which leads to a deceptively inflated number of ledger entries when in reality the number of orders aren't nearly as high. This may lead to the wrong classification of trader vs investor.
5. When crypto is deposited to ICOs the value of the token in the ICO is yet to be determined after the completion of the ICO which leads to further complications.
6. The book keeping requirements related to taxing crypto to crypto is unreasonable especially if value of trades is small and apportioning packets in relation to potential CGT discounts adds another complication.
7. The crypto to crypto classification as a disposal of assets event is not clear to hundreds of people I've seen on forums especially for those have been trading for the past couple of years and haven't considered that in their tax returns, what's supposed to happen there?
I think the warnings and threats issued on multiple news platforms are unwarranted in light of the lack of proper awareness campaigns, education and guidance from the ATO. The effort put to protect people's investments and provide them with information should precede taxation threats propagated by the media.
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Devotee

Replies 4

@Akram I’m no expert just interested.

If you buy Crypto to be able to buy stuff with it then it’s a Personal Use Asset, just like a car.

If you paid less that $10,000 then if it goes up in value while you have it to buy stuff with then the gain is not taxable (but you can’t count the loss either).

This category of asset was bought in when capital gains tax was introduced so people not trying to make money with common stuff they bought and used didn’t mean they had to muck about with the tax considerations

As soon as your trying to make money your generating income, and the deal is you pay tax on income.

You want to live in Australia, be an Australian, that’s the deal. Your choice.

So that gives the general context and mood.

Your numbered points:

1. That’s not unusual. If that wasn’t the case no one would transact with $AUD they swap stuff and never pay tax.

2. Same as 1. Your obligation is to pay tax in $AUD if you want to live in Auatralia. 1 in all in. No exceptions. It’s the egalitarian way. All equal before the Law. No cutting yourself of from the collective obligation to those down on their luck.

3. The sale for $AUD generates a value in $AUD. If it’s to your mate you’d still have to show it wasn’t a scam valuation of course. And for the multiple gains part remember that 2 $50 gains in the tax year is like 1 $100 gain. You pay the same tax.

That’s the first three.



If you buy Crypto

Initiate

Replies 3

You haven't addressed any of my points but rather went on a patronising rant about if you want to be australian and what not! Please keep your bias to yourself and stick to the topic. It's called crypto to crypto complications not 'open invite to stereotype and patronize others about their tax duties'!

Initiate

Replies 7

Exactly!


I really want to hear what the ato says about 2 and 3.

 

2. If gains in crypto value are realised and the ATO only accepts payment in AUD that forces the investor/trader to liquidate said asset to pay tax on such gains which doesn't sound right
3. Liquidating crypto assets to pay tax on prior crypto to crypto gains is in itself a second disposal event and would lead to further taxation as well as pushing the investor/trader's tax bracket when the said person has only receives said gains only once but it was taxed twice and hit his tax bracket twice.

 

It is not fair that we need to sell part of our investment to pay our tax bill. ATO wake up to yourselves!

By being forced to dispose of part of our investment to pay our tax bill you are reducing our future profits on the investment.

It is an investment for a reason. We are not realising a real profit until the crypto is converted back to AUD.

CGT should only be payable when crypto is converted back to AUD or used to purchase goods over 10K AUD.

Devotee

Replies 2

Akram, sorry mate but given the bit of my response you’ve focussed on and the lens you’ve placed over it the “complication” is pretty obvious.

Morality.

PullIng your weight, making money but putting something on the plate for charity.

Initiate

Replies 1

Can you stop attempting at profiling and analysing others whom you have never met and maintain focus on the topic at hand. Although I thought it was clear but there is nothing that I said that infers that i do not want to pay taxes or see value in what it brings to a community, actually I am posting a topic for discussion on the taxation office's forum which, if anything, shows I am indeed trying to understand my tax obligations and discuss with the ATO community about how crypto is taxed. You have decided to pull out several unjustifiable assumptions which clearly show an inherent nationalistic prejudice that you have and project it on a complete stranger. I have no time or energy for you anymore. Better yet, can you kindly let this go and go on your merry way.

Devotee

Replies 6

Aero, let’s run through the examples.

You buy A for $100 in August. You swap A for B in December and the value of both at that time is $180. So far you have a gain of $80.

June comes. You have to come up with tax let’s say it’s 20%. So you have to come up with 20% of $80 for tax.

Wouldn’t you just sell your B on June 30, pay $8 in tax. And buy back B with the cash that remains?

Devotee

Replies 0

Akram ok mate fair enough. The whole crypto industry clearly needs a good look at I can see both sides

Initiate

Replies 5

Hi Jack,

 

Are you a crypto investor?

I will tell you why it is not feasible for me to sell B to pay my tax and buy back B with what remains.

I will change the example slightly.

 

ATO listen up!

 

I buy A in August 2017 for $10,000 which gives me (50,000 coins each coin being $0.20each)

In December 2017 I trade A now worth ($2.00 each 50,000 coins $100,000) for B ($1.25 each 80,000 coins $100,000)

Tax time comes and i need to pay my 50% CGT on my $90,000 profit being $45,000. I dont have this much in my aud bank account

so I must sell $45,000 worth of my crypto of B being 36,000 coins to pay my tax bill.

 

Now in August 2018 the value of coin B skyrockets to $100 per coin but i had to cash out ($45,000 worth being 36,000coins) becuase

i was forced to pay on a crypto to crypto trades instead of paying when i cash out to AUD or on purchases.

That 36,000 coins which i had to sell to pay my tax bill of $45,000 would now be worth 3.6 million dollars.

 

In cypro you are trying to increase your bag of coins, so if we are forced to sell our crypto at tax time, we are significantly reducing the coin count. It is an investment, we dont want to have to cash out the investment at tax time as it reduces future profits.We should only be paying CGT when we decide to cash out our investment in AUD or on purchase.

 

If you buy a house as an investment as it is going up in value over the next 10 years, would you sell half of your house

to pay your tax bill? No becuase in 10 years time that house is going to be worth much more.

We arent trying to avoid tax, i am completely ok with paying tax once i cash out to AUD or on purchases above 10K

But having to cash out part of our investment to pay the tax bill due to them making it crypto to crypto is not right!

Devotee

Replies 3

Hi Aero,

What you have described is a cashflow problem.

When you traded in Dec 2017 Crypto A for Crypto B you crystallised the gain having no loss to match the gain come June 30 you have a tax liability.

Think of it this way.

Part of that gain in not yours, it belongs to consolidated revenue.

It’s not yours to invest.

If you want to have larger exposure to an investment upside than what your net assets can fund you need to borrow money.

The debt you have to the ATO is short term, but the assset you wish to hold is for the long term.

This mis-match in terms is the source of your problem.

If you can’t get a loan to buy more Crypto I’d look at what terms the ATO can give you to pay off your debt to them.

You won’t get anywhere claiming that you want to hold someone else’s money for longer that they will allow.

If I was you I would look at what sort of case you can mount for why a swap of crypto is synonymous to being a swap of one thing for the very same thing. It’s a hard ask because as soon as the value of one “batch” is different you have an argument that it is not like for like.

You have to understand that if what you are asking for was legislated that no one would ever convert to cash and no one would ever spend over $10,000, avoiding tax altogether.

This is human nature I’m afraid. Enough people are dishonost, and the rest don’t want to be mugs if others aren’t paying tax and they are.

If you want to leverage into longer term asset appreciation see if you can fund it with longer term debt than a tax bill?

But see what terms the ATO gives you would be my first check. If you can’t pay but will be able to pay then that might be what you are after?
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